Budget 2013 comment: is it a good time to buy a house?

By Steve Manning, Founder, Manning and Company Independent Financial Advisers

Let’s face it; George Osborne had very little room for manoeuvre.  The country is spending more than it is earning - no different from most of Europe. 

The Chancellor’s task is a pretty tough one.  He needs to stimulate growth to provide more income for the treasury, while at the same time reducing spending and limiting government borrowing.

The political parties largely disagree on how much we should be borrowing to stimulate the economy.  Get it wrong, and the consequences are not good: bankrupt because of over-borrowing; or bankrupt because of severe depression.

By and large, being a ‘neutral’ budget, it was endeavouring to make better use of the money in the system - effectively robbing Peter to pay Paul.

I want to focus on just one of these initiatives: stimulating the housing market.

Of course the devil is in the detail.  But as long as house prices do not restart the ridiculous growth they experienced during the boom (which was fuelled by easy, unsustainable debt) these incentives will be good for all concerned - the buyer, builders, craftsmen, employees, and of course the treasury.

If lending is neither too stringent nor too lax, the Interest-Free Deposit scheme and the Mortgage Indemnity Guarantee offered by the government for high loan-to-value loans should enable more first time buyers.  This in turn will set the ball rolling for more activity up the line.

So, is it a good time to buy?

There are several aspects to consider.  Mortgage interest rates are low; and inflation does not appear to be a threat.  Mortgage repayments tend to be less than rental payments (more so as the years of ownership increase and rental inflation rises).  Historically (and it is our expectation) you would be purchasing an asset that will increase in value over time.  So on that basis, I would say that if these government incentives now put you in a position to purchase your own property you should seek professional advice and investigate further.